South Korea’s NH NongHyup Bank, which issues real-name accounts for two major cryptocurrency exchanges here – Bithumb and Coinone – asked them to halt deposit and withdrawal services until they adopt stronger money laundering regulations, reports said Wednesday.
The commercial lender has reportedly requested the two exchanges to quicken its pace in adopting the “travel rule,” a global standard that requires virtual asset service providers to share the identities of users involved in any virtual asset transfers over 1 million won ($884). The rule is imposed by the Financial Action Task Force, an intergovernmental anti-money laundering watchdog and virtual asset service providers include cryptocurrency exchanges and digital wallet providers.
The travel rule is reflected in Korea’s cryptocurrency law, officially called the Act on Reporting and Using Specified Financial Transaction Information. The financial authorities are currently giving local exchanges room to build related systems, but the grace period is set to end March 25, 2022.
In June, four major cryptocurrency exchanges here, including Bithumb and Coinone, announced to launch a joint venture to develop a system that would help them heed to the “travel rule.” But Upbit, one of the four, said earlier this month it has decided to pull out of the project, seeking to create its own system. Korbit, meanwhile, has decided to stick with the original plan.
Industry watchers believe Bithumb and Coinone to comply with NH NongHyup’s latest request as they need the traditional lender’s help in maintaining the current real-name account partnership. A recent amendment to the Act on Reporting and Using Specified Financial Transaction Information has set a Sept. 24 deadline for all cryptocurrency exchanges here to partner up with commercial banks for issuance of real-name accounts. Those who fail to do so and fail to register with the financial authorities by the deadline, will face a jail sentence up to five years or a fine of up to 50 million won, if they continue to operate regardless.
NH NongHyup recently agreed to extend its current partnership with the two virtual asset exchanges by three months until Sept. 24, the deadline.
A Bithumb official said that the request means to stop virtual asset transfers between cryptocurrency exchanges and expressed concerns that its customers would be charged with more transaction fees. Because of NH NongHyup’s request, its customers would have to withdraw the money in Korean won and purchase coins from another exchange, if they want to “transfer” their assets, the official explained.